Whitbread in the frame for asset swap

Whitbread closed 9p higher at £11.80 yesterday after Citigroup suggested it could be a good idea if the leisure group swapped its pubs for the hotels business owned by Mitchells & Butlers

Analyst Leslie Zarka wrote: "M&B is looking to sell its lodges and to consolidate the managed pub sector, Whitbread is looking to consolidate the UK budget hotel market. The repositioning of Whitbread's pubs is not living up to management expectations, and Whitbread and M&B have Robert Tchenguiz as a common shareholder.

"In our view, all this argues in favour of an asset swap of Whitbread's pubs for M&B's hotels." He reckoned the Whitbread pubs were worth around £700m and M&B's hotels £200m, leaving M&B to pay the £500m difference.

Brewer SABMiller fell 38p to £12 after news of Belgian group InBev's unsolicited $46.3bn (£23.8bn) bid for US rival Anheuser-Busch. Investors believe if the deal goes through it will provide an even stronger competitor for SABMiller, and would allow it to penetrate markets such as South Africa where SABMiller has a near-monopoly. Nor do analysts believe InBev will turn its attention to SABMiller if the Anheuser move fails.

The market was in fairly resilient mood, with beleaguered banks and builders showing signs of revival. Aided by this, and a bright start on Wall Street after the InBev bid, the FTSE 100 closed 67.2 points higher at 5790.5 while the FTSE 250 added 131.1 points to 9554.2.

Mortgage bank HBOS was the biggest riser in the leading index, closing up 25p at 283p and above its 275p rights issue price. Royal Bank of Scotland, which has completed a £12bn cash call of its own, rose 16.75p to 229p, while Standard Chartered climbed 105p to £16.30 after an upbeat note from Goldman Sachs. But Alliance & Leicester, almost entirely dependent on the housing market, lost a further 13.25p to 305.5p.

Barratt Developments edged up 3.75p to 76.25p on further consideration of its attempt on Wednesday to calm investors' nerves. Panmure Gordon issued a buy note but not everyone was convinced. KBC Peel Hunt analysts said: "Barratt has sought to draw a line in the sand but it did not have anything new or reassuring to say in its statement. The risks on the financials remain as onerous as they appeared before." Numis said a write-down of £150m by the company would breach one of its key covenants: "The key issue remains the banks' attitude to a breach and whether they force a debt-for-equity swap (something we feel is possible but unlikely) or work with the company to find a more acceptable solution for shareholders."

Still in the housing sector, Taylor Wimpey recovered 8.5p to 61p. Part of its share price fall on Wednesday was due to unsubstantiated rumours that hedge fund Toscafund - a major shareholder - was liquidating several of its positions. Tosca boss Martin Hughes emphatically denied this and blamed the tale on market manipulation. On Taylor Wimpey, he said: "We've held the shares for four years. There is no doubt housebuilders are in trouble but we're in a long-term fund, not a trading fund."

Another Tosca holding, Aberdeen Asset Management, was also heading back higher, up 10.25p to 128.25p.

Retailers were under pressure after disappointing trading news from Carphone Warehouse, down 25.25p to 202.5p, and Argos and Homebase owner Home Retail Group, 8.75p lower at 215p. Rival Kingfisher, the company behind the B&Q chain, fell 5.3p to 118.9p.

But supermarket group J Sainsbury benefited from Deutsche Bank upgrading from sell to hold, and its shares added 6.25p to 326p.

Mining group Xstrata added 197p to £42.32p. Its former predator, Brazil's Vale, is said to be planning to raise between $15n and $30bn for acquisitions. This prompted traders to suggest it could have Xstrata back in its sights. But Evolution Securities, while acknowledging this possibility, said Vale may be interested in US copper producer Freeport McMoRan or aluminium group Alcoa. Vedanta Resources rose 48p to £22.83 as Goldman Sachs moved from neutral to buy.

British Energy lost 5p to 737p as Spain's Iberdrola indicated it was not in the running to bid for the nuclear power group. France's EDF looks like having the only bid on the table so far. Publishing group Johnstone Press - another company that had fallen below its rights issue price - recovered 8p to 58p as Kaupthing analysts said there was a case for Usaha Tegas, the Malaysian group which holds a 20% stake, to make a bid for the whole business. But Forth Ports, owner of the Grangemouth and Tilbury yards, sank 115p to £18.65 as potential purchaser Babcock & Brown, an Australian investment group, ran into concerns about its debt and banking covenants.

Aim-listed DiamondTech, specialising in technology for processing diamond-bearing gravel, rose 16% to 2.75p on news production had started at the Grasfontein prospect in South Africa.

Pizza break

Recent ITV1 success Britain's Got Talent saw 14.4 million viewers tune into the final at its peak, which was good news for sponsor Domino's Pizza, up 0.75p to 210p yesterday. Domino's told analysts at Dresdner Kleinwort this week that "the phones rang immediately after the commercial breaks started". Despite the consumer caution, orders from customers in the AB socio-economic class are on the increase as they trade down, the company assumes, rather than going out to restaurants. In the DE category, pizzas are being bought as normal. So it appears trading remains strong ahead of the company's half-year results announcement on July 21. Dresdner has a 285p price target for the shares.